When it comes to retirement planning, 70 is the new 65. Here's how the Center for Retirement Research at Boston College reached that conclusion.
The center regularly measures what it calls retirement readiness. It calculates how much money people have as a percentage of the amount they'll need to live comfortably in retirement. Over the last decade, researchers have found that retirement readiness has declined. Currently, at age 62, the point at which about two-thirds of people collect Social Security, only about 30 percent of households are financially prepared for retirement.
By age 66, Social Security's full retirement age, the center says 55 percent of households are financially prepared to quit working. But that leaves 45 percent of people -- about half -- who still don't have enough money at 66 to retire.
The reason increasing numbers of people are finding themselves in this position is easy to understand, says Alicia Munnell, the director of the center.
- People are living longer, so money has to stretch further.
- Social Security replaces an increasingly smaller percentage of total income.
- Interest rates are very low, so it's hard to produce significant income from savings.
Munnell and other center researchers have an answer: Unless you are very young and saving diligently, the best way to fix this problem is to work longer. If you do that:
- Social Security benefits go up.
- You save more money in your 401(k) or other retirement accounts.
- You shorten how long you have to depend on your savings to support yourself.
Munnell says lots of people have already concluded that they'll have to work longer, but they aren't sure just how much longer. "I think there is lots of anxiety," she says.
Much of it, she believes, isn't because people object to working longer. What bothers them is how open-ended it is. People understand they are going to have to work longer, but they don't want to think they might have to work until they're, say, 90.
If that's you, the center has calculated that answer. Age 70. By age 70, the center figures that 86 percent of households will be able hang up their work boots and rock on the porch -- and maybe take a cruise once in awhile.
Depressed yet? Is there anything to do about it besides buy lottery tickets?
Probably not, says Munnell. It's too late for many of us. "If you're talking about older people, it's hard to increase savings enough to give you retirement security," she concludes.